Bank of England Leaves Cash Rates Unchanged

Bank of EnglandThe Bank of England decided to keep its cash rates on hold at 0.1 percent and decided to set its bond purchasing program target at 645 billion pounds. They also stated their expectations for the British economic performance, setting their growth expectations at -14 percent for this year, which will be followed by a 15 percent bounce-back in 2021 only if the UK implements very significant monetary and fiscal stimulus programs.

“Existing stance of monetary policy is appropriate,” stated the Bank, “BoE stands ready to take further action as necessary to support the economy”, they added.

Besides this, the bank stated that the spread of the virus together with the measures that were implemented to contain its advance is having a significant impact on the United Kingdom’s economy, as well as the world’s economy. Economic activity has fallen in a significant way since the beginning of the year and unemployment has risen markedly.

The bank also praised the government, saying that the support measures they implemented will prevent longer-lasting damage.

“The support measures in place are assumed to help prevent much longer‐lasting damage,” stated the bank, highlighting that the outlook remains uncertain and that the future state of the economy will heavily depend on the evolution of the pandemic and on how the governments, households, and businesses will respond to it.

As per the inflation levels, they expect it to remain below 1 percent in the upcoming months, mostly due to the pernicious effects of the coronavirus in the economy as well as the state of the oil markets.

The Bank of England’s governor Andrew Bailey said he expects the negative effects of the coronavirus outbreak on the demand to last at least for a year after the lockdown is ended. He added that also expects some long-term damage to the economy’s capacity, but that in the illustrative scenario they consider those effects to be small.

At the moment, there are around 201,101 confirmed COVID-19 cases in the United Kingdom, as well as a death toll of 30,076. The government said that is not lifting up the restrictions until it’s safe, but announced that the Prime Minister is working on a strategy that points out to a gradual easing of the current restrictions.

“We want, if we possibly can, to get going with some of these measures on Monday,” said Boris Johnson during a Prime Minister’s Questions session, “It would be a good thing if the people had an idea of what’s coming the following day, that’s why I think Sunday, the weekend, is the best time to do it,” he added, saying that the government should make sure that any potential change is backed by data.

By 7:39 GMT the Pound Sterling advanced 0.39 percent against the US dollar, hitting the 1.2389 level. Conversely, it gained 0.28 percent against the Euro, hitting the 1.1464 level.

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